4/26/2010 @ 4:55PM

Combating Climate Change

Those looking for ways to speed global action to combat climate change should look in part to the rules of the World Trade Organization. WTO rules can be used to hasten the spread of green technologies worldwide.

To date, most of the all-too-little attention paid thus far to the connection between trade and climate change has focused on how trade rules constrain proposed national actions that would restrict international trade in products based on the excessive carbon emissions from their production.

In the absence of a global climate treaty, or of an evenhanded national carbon tax, such tempting defensive border measures could run afoul of WTO rules and set up an unwelcome and unnecessary collision between trade and environmental concerns in international litigation in the WTO.

But world trade rules offer opportunities as well as constraints in the struggle to slow climate change, and these opportunities are being missed.

Global implementation of climate-friendly technologies is a key to the success of global efforts to confront climate change. Access to green technologies by developing countries is central to this task. In particular, it is vital to increase energy efficiency in developing countries, which are only one-third as energy efficient as developed countries.

Trade negotiators have been trying to address this need for some time in the prolonged Doha Round of global trade negotiations. On the WTO agenda in the trade round are efforts to reduce or eliminate tariff and nontariff barriers to trade in dozens of environmental goods and services, including everything from wind turbines to solar water heaters to the thermostats and the generators needed to operate renewable energy plants.

Eliminating the barriers to trade in green goods and services would help diffuse them worldwide at the lowest possible cost by reducing their prices. In addition, it would provide incentives and expertise needed to enable developing countries to expand their production, use and export of climate-friendly technologies.

But there is much more that ought to be on the global trade negotiating agenda that could also further the cause of fighting climate change.

New green technologies are everywhere subject to mandatory technical regulations and to voluntary standards of all kinds. They are submitted to “conformity assessment procedures” used to determine whether technical requirements have been fulfilled. They can be affected by labeling schemes, by bans and by other prohibitions.

All this falls under WTO rules. Those rules encourage the international harmonization of standards and technical regulations. Such harmonization would spur the distribution of green technologies worldwide and would enhance energy efficiency. Harmonization should not be merely encouraged by WTO rules; it should be a specific goal of the WTO agenda.

In the past decade, more than 200,000 patents were registered worldwide for solar, biomass, fuel cell, ocean, wind, geothermal and other new green technologies. These innovations would not exist without the legal assurance that intellectual property rights will be protected.

WTO rules protect patents and other intellectual property rights worldwide and rightly so. Those rules also aspire to an appropriate balance between encouraging innovation and allowing reasonable access to innovation through the transfer and dissemination of new technologies. Striking the best balance between innovation and access should likewise be a specific goal for WTO negotiations.

Lastly, there are WTO rules on governmental subsidies. Those rules ensure that international trade is not distorted unfairly by governmental support that is conditioned on exports or on the use of domestic instead of imported inputs, or that is targeted to favored domestic industries.

Governmental subsidies lower costs for local producers and thus let them sell their products for lower prices. This can reduce access to local markets for competing foreign producers, and it can give local producers an unfair advantage in exporting to other markets.

At the same time, and unquestionably, grants, tax breaks and other governmental subsidies can help accelerate success in the struggle against climate change by inspiring innovation and by jump-starting the development and deployment of clean technologies.

Widespread public subsidies that encourage continued high-carbon consumption should be curtailed nationally. Subsidies that ease the necessary transition to low-carbon economies should be encouraged internationally.

Finding the best way of encouraging climate-friendly subsidies without permitting them to become pretexts for protectionism should be high on the WTO agenda going forward.

This is not a new idea. As agreed in the Uruguay Round of trade negotiations that established the WTO fifteen years ago, subsidies rules allowed “assistance to promote adaptation of existing facilities to new environmental requirements” and provided that no trade actions could be taken against such assistance.

Regrettably, this enlightened WTO permission slip for environmental subsidies expired after five years, despite having significant support for renewal in the WTO, especially in Europe. It got lost (ironically) a decade ago amid the negotiating clutter occasioned by the environmental and other protests against the WTO in Seattle.

Today the challenge of climate change, to say the least, justifies the restoration of space under WTO rules to meet “new environmental requirements.” An exemption for environmental subsidies that further the fight against climate change should be created anew by the members of the WTO.

Trade can indeed be green–if we use the tools of our rule-based trading system wisely.

James Bacchus is a former member of Congress from Florida, and a former chairman of the Appellate Body of the World Trade Organization. He chairs the global practice of the Greenberg Traurig law firm.